–Helicopter Drops:Martin Wolf says that central banks should consider financing public spending. “First, it is impossible to justify the conventional view that fiat money should operate almost exclusively via today’s system of private borrowing and lending. Why should state-created currency be predominantly employed to back the money created by banks as a byproduct of often irresponsible lending? Why is it good to support the leveraging of private property, but not the supply of public infrastructure? I fail to see any moral force to the idea that fiat money should only promote private, not public, spending. Second, in the present exceptional circumstances, when expanding private credit and spending is so hard, if not downright dangerous, the case for using the state’s power to create credit and money in support of public spending is strong. The quantity of extra central bank money required would surely be smaller than under today’s scattergun quantitative easing. Why not employ monetary financing to recapitalise commercial banks, build infrastructure or cut taxes? The case for letting fiscal deficits facilitate private deleveraging, without undue expansion in overt public debt, is surely also strong.”

–Taylor Rule:Pelin Ilbas, Øistein Røisland and Tommy Sveen examine the influence of the Taylor rule on U.S. monetary policy. “Economists everywhere recognise the Taylor rule’s importance in monetary policymakers’ decisions. But exactly how important is it? This column aims to analyse the Taylor rule’s influence on US monetary policy by estimating the policy preferences of the Fed. There is a high degree of reluctance to let the interest rate deviate from the Taylor rule and, contrary to the literature and current policy debates, it seems large deviations from the Taylor rule between 2001 and 2006 were in fact due to negative demand-side shocks. During this period, there is in fact no evidence to support the notion of a decreased weight on the Taylor rule.”

–Education:Peter Orszag makes the case that more college graduates translates into faster economic growth. “For much of the 20th century, the U.S. benefited from rapidly rising educational levels, as the economists Claudia Goldin and Lawrence F. Katz of Harvard University showed in their 2008 book, “The Race Between Education and Technology.” Over the past 30 years, however, educational attainment has risen much more slowly. From 1960 to 1985, the share of adult Americans with at least a college degree more than doubled, to 19 percent from less than 8 percent. From 1985 to 2010, though, the share rose by only about half, to 30 percent. This slowdown has exacerbated inequality and crimped growth. If the increase had continued at the same rate as before 1985, about half the adult population today would have at least a college degree. More graduates would mean lower inequality, because the wage premium for a college degree would be reduced by the additional supply. And it would mean higher national income, because better-educated workers are, on average, more productive.”

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